Zhi Tong Cai Jing·2026-03-11 06:46Core Viewpoint - Morgan Stanley maintains an "overweight" rating for Cathay Pacific (00293) and Singapore Airlines, with target prices set at HKD 18 and SGD 8.4 respectively, despite the impact of the Iran conflict on the global airline industry [1] Group 1: Company Performance - Cathay Pacific is expected to report its performance for the previous year today [1] - The airline's operating profit is projected to grow by 18% year-on-year in the second half of 2025, while net profit is expected to remain roughly flat [1] - The resilience in passenger and cargo demand is offset by losses from Hong Kong Express and a one-time supplier settlement gain of HKD 900 million [1] Group 2: Market Conditions - The Iran conflict has led travelers and shippers to reroute through Singapore, Hong Kong, and other Asian hubs, impacting the global airline industry [1] - Both Cathay Pacific and Singapore Airlines have seen stock price declines, but are expected to outperform other global peers due to strong balance sheets, prudent fuel hedging, flexible route networks, and unique access to key corridors [1] Group 3: Financial Considerations - High ticket prices and rising cargo yield are expected to support both airlines in the short term, although these benefits may be offset by oil price trends [1] - While fuel hedging provides short-term cushioning, it remains below the levels of European peers, limiting profit margin protection in a volatile fuel environment [1]